What is the equation for average fixed cost (AFC)?

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Prepare for the OnRamps Economics College Exam with detailed multiple-choice questions and explanations. Strengthen your understanding and boost your performance!

Multiple Choice

What is the equation for average fixed cost (AFC)?

Explanation:
Average fixed cost is the fixed cost allocated to each unit of output. Since fixed cost does not change with how much you produce, you spread that constant amount over the number of units you output. That gives AFC = FC / OUTPUT. As output increases, the same fixed cost is spread over more units, so AFC falls. The other forms don’t fit: dividing variable cost by output gives average variable cost, not fixed; multiplying fixed cost by output isn’t a per-unit measure; and subtracting output from fixed cost isn’t a meaningful cost-per-unit calculation.

Average fixed cost is the fixed cost allocated to each unit of output. Since fixed cost does not change with how much you produce, you spread that constant amount over the number of units you output. That gives AFC = FC / OUTPUT. As output increases, the same fixed cost is spread over more units, so AFC falls.

The other forms don’t fit: dividing variable cost by output gives average variable cost, not fixed; multiplying fixed cost by output isn’t a per-unit measure; and subtracting output from fixed cost isn’t a meaningful cost-per-unit calculation.

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